Author: Nikou Asgari

Translation: Block unicorn

Three months ago, George Calarco never considered that his semiconductor company would start buying Bitcoin.

His New York-listed company's stock price had long been sluggish, and after reading news about a healthcare company whose stock soared after purchasing digital currency, Calarco began to take an interest in Bitcoin. He said, after a failed deal scared off investors, "I was looking for ways to unlock the company's value."

After discussions with the board and some investors, Calarco decided to launch a Bitcoin strategy. Sequans Communications raised $384 million from debt and equity markets to purchase the world's most popular cryptocurrency. Its stock price soared 160% after the announcement.

Calarco said, "I wouldn't have said this last year, but today I fully believe… I am 100% confident that Bitcoin will always exist."

This cryptocurrency novice largely credits the transformation of Bitcoin evangelist Michael Saylor. Since 2020, this American cryptocurrency mogul has spent billions of dollars almost weekly buying Bitcoin and hosting conferences to encourage others to follow suit. Saylor's software company has transformed into a Bitcoin hoarder, with a current valuation of about $115 billion, nearly double the value of its Bitcoin holdings, as investors flock in. Last week, Strategy purchased $2.5 billion worth of Bitcoin, marking its third-largest purchase on record. Its stock price has surged over 3000% in five years.

This success, coupled with U.S. President Donald Trump's full support for the digital asset industry, has inspired a surge in the so-called "cryptocurrency treasury companies" globally.

Biotech firms, mining companies, hoteliers, electric vehicle manufacturers, and e-cigarette makers are all scrambling to buy cryptocurrencies, supported by investors looking to share in the cryptocurrency market's dividends without directly engaging with digital assets.

According to data from cryptocurrency consulting firm Architect Partners, about 154 publicly traded companies have raised or committed to raising a total of $98.4 billion for cryptocurrency purchases in the year ending August 5. Before this, only 10 companies had raised $33.6 billion.

Some companies have followed Strategy's lead by changing their website colors to Bitcoin's orange hue and providing data showing how much cryptocurrency they hold, its value, and other metrics important to investors.

Even Trump himself has joined the action—his family media company raised $2 billion in July to purchase Bitcoin and related assets.

In a year where Bitcoin and benchmark stock indices have repeatedly hit new highs, traditional investment institutions are struggling to find the best way to participate in the new world of digital assets, leading to a surge in cryptocurrency hoarding.

But many are skeptical about the sustainability of this trend. The rapid growth has left some investors worried about a market overheating. Brian Estes, CEO of Off The Chain Capital, who has invested in several Bitcoin treasury companies, stated, "This is similar to the internet bubble of 1998," when companies rushed to rebrand themselves as internet-first enterprises to attract attention.

The surge in new companies has also raised concerns about a potential drop in cryptocurrency prices and its ripple effects. Companies that have borrowed billions to purchase cryptocurrencies may soon find themselves unable to repay creditors.

Eric Benoist, an investment banking technology and data expert at Natixis CIB, said, "The risk is a Bitcoin crash." In such a scenario, stock prices would also fall, and if companies cannot pay bondholders, investors would incur losses, "which could have systemic effects on the Bitcoin ecosystem," he added. "Every time there is a small panic in the market, the entire market drops."

Kevin de Patoul, CEO of cryptocurrency market maker Keyrock, stated that investors should maintain a realistic attitude towards this. "You inject a lot of risk into a system that ultimately has almost no support, except for the continued appreciation of the assets."

For struggling companies, purchasing cryptocurrencies seems like a surefire way to attract investor attention and boost stock prices—at least temporarily.

Aidan Bishop, founder of London-listed Bluebird Mining Ventures, said, "If we hadn't gone down this path, we would have struggled to raise future funds; we are like a company on life support." The company raised £2 million in June to purchase Bitcoin. Before that, "to raise funds, I had to go door to door asking for help," he added.

Cryptocurrency evangelist Michael Saylor has spent billions on Bitcoin since 2020 and has hosted conferences to encourage others to follow suit. His company Strategy's stock price has surged over 3000% in five years. Source: Travis P Ball/Sipa/Reuters

Most newcomers are ordinary businesses with no prior cryptocurrency experience, yet the value of their digital assets far exceeds their actual revenues.

For example, U.S. thermal energy company KULR Technology has a market capitalization of about $211 million, despite posting an operating loss of $9.4 million in the first three months of this year. However, it holds Bitcoin worth approximately $118 million.

In the UK, website design company The Smarter Web Company achieved a net profit of only £93,000 in the six months ending in April, but its market capitalization is about £560 million due to its Bitcoin holdings valued at £238 million.

The premium investors are willing to pay highlights their recognition of the value of these companies holding cryptocurrencies.

Companies that prove their commitment to continue raising funds to purchase cryptocurrencies will be rewarded by investors, with their stock valuations exceeding the value of the Bitcoin they hold. To actually purchase these tokens, companies typically raise funds through debt or equity issuance and then invest the funds in cryptocurrencies via exchanges like Coinbase.

Speed is crucial. Estes stated, "Ultimately, it's a matter of speed. The goal is to increase the number of Bitcoins per share, and those who can do this the fastest will receive a high premium."

For investors, "Bitcoin per share"—the number of Bitcoins held per share of the company—is a measure of success. If a company quickly buys more tokens, the number of cryptocurrencies indirectly held per share by equity investors increases—this is also why investors are willing to pay a premium early on, as they hope to hold more Bitcoin per share in the future.

Most companies buying Bitcoin are also operating other businesses, but the new wave of transactions involves shell companies that are buying or committing to buy cryptocurrencies in large amounts. These companies operate as Special Purpose Acquisition Companies (Spacs), raising funds to purchase or merge with existing businesses.

Rob Hardwick, a general partner at venture capital firm Dragonfly Capital, stated that when a company with an actual business buys Bitcoin, the operational risks "are often actually higher": "You have an existing management team whose goals may change over time and may conflict with the operational business."

Executives are now starting to buy other tokens as this trend has expanded beyond Bitcoin. These tools also provide a way for those holding large amounts of cryptocurrencies to extract value without selling.

ReserveOne is a $1 billion deal funded by investors including exchanges Kraken and Blockchain.com, planning to purchase Bitcoin as well as other crypto tokens like Ethereum and Solana. Ether Machine raised $1.5 billion, intending to use it for purchasing Ethereum. Former Barclays CEO Bob Diamond raised $888 million through a Spac deal with a biotech company to purchase HYPE tokens. Cryptocurrency billionaire Zhao Changpeng's venture capital firm led a $500 million deal to help a Canadian e-cigarette manufacturer purchase BNB, the token of the Binance exchange co-founded by Zhao.

Hardwick stated, "We are clearly witnessing a somewhat irrational gold rush. It feels unnecessary to set up (investment tools) for all these different tokens."

For retail and institutional investors, cryptocurrency treasury companies provide an alternative way to gain exposure to tokens without directly holding them.

Some investors choose to achieve this through U.S. exchange-traded funds (ETFs) launched by large asset management firms like BlackRock, Fidelity, and Invesco, which have accumulated over $100 billion in investments in these regulated products.

However, other investors cannot do so. In countries like the UK and Japan, cryptocurrency ETFs have been banned as regulators attempt to protect investors from the volatility risks of digital assets. Therefore, treasury companies serve as a proxy tool, providing investors with a way to indirectly access cryptocurrencies through tradable instruments.

Tyler Evans, co-founder of UTXO Management, stated, "Many institutional (investors) cannot invest in ETFs or cannot directly hold (cryptocurrencies)." He added, "We believe Bitcoin treasury companies fill this gap, issuing securities that comply with investment permissions." His company, with a size of $430 million, has invested 95% of its investments in Bitcoin fund management companies.

Investors are also taking advantage of tax arbitrage opportunities between holding crypto assets and stocks in some countries. In Japan, the tax rate on cryptocurrency gains can be as high as 55%, while the tax rate on stocks is 20%. In Brazil, the tax rate on cryptocurrency gains is 17.5%, while the tax rate on stocks traded on exchanges is 15%.

Source: U.S. President Donald Trump's full support for the digital asset industry has inspired the booming development of "cryptocurrency treasury companies" globally.

Thus, investing in companies holding large amounts of cryptocurrencies may be more tax-efficient than directly holding cryptocurrencies.

Eager investors are searching globally for new countries with similar tax structures to profit. Estes stated, "The U.S. market is now saturated… We are looking for opportunities outside the U.S."

The new alliance between cryptocurrencies and capital markets is somewhat ironic, as its original mission was to disrupt traditional financial markets, away from the prying eyes of large institutions.

Raising debt and equity from investors is at the core of the strategy and is a necessary condition for maintaining operations. Companies that are not fast enough in purchasing cryptocurrencies have begun to see their stock prices decline.

Despite Sequans Communications' stock price soaring 160% after it began purchasing Bitcoin, its stock has now fallen back to pre-purchase levels, reflecting investor dissatisfaction with the speed of its acquisitions.

Estes said, "You combine Wall Street and cryptocurrency, and you need the market to support this harvest."

To scale up, many such companies are planning to go beyond merely being cryptocurrency pools listed on global stock exchanges.

Diamond stated that his investment tool focused on HYPE tokens may acquire other cryptocurrency treasury companies. "If they get into trouble, we can acquire and rebuild them," he said. "This will create opportunities for the strongest, and frankly, it's about scooping up those poorly managed or underfunded companies."

Meanwhile, Japan's Metaplanet, the fifth-largest corporate Bitcoin buyer globally, plans to borrow against its vast token reserves and transform into a cryptocurrency financial services company.

U.S. thermal energy company KULR is also exploring "Bitcoin-backed financial services," such as lending, while Darren Hazelwood, CEO of mining company Panther Metals, stated plans to use its Bitcoin holdings to fund future exploration projects.

Benoist from Natixis CIB said, "The natural evolution is financial services because you can back your financial commitments with a large pile of Bitcoin."

Source: Attendees pose for a photo after U.S. Vice President JD Vance's keynote speech at the Bitcoin conference in Las Vegas. Companies that are not fast enough in purchasing cryptocurrencies have begun to see their stock prices decline.

However, cryptocurrency lending is a high-risk business. In 2022, the lending market collapsed due to a series of defaults triggered by falling prices, leading to the collapse of the exchange FTX.

Benoist added, "My main concern with this strategy is that I don't quite understand how it will end. Companies get caught in a loop where they must continuously maintain this cycle through additional purchases, then go back to the market to buy more—this cycle must continue to justify the premium."

The biggest risk is how deep the damage will be if—or when—cryptocurrency prices crash. Inevitably, a downturn in the cryptocurrency market means that companies linked to tokens will also see their stock prices decline.

Those companies that have taken on debt face greater risks because they need to pay interest to investors and may be forced to raise more funds or sell their cryptocurrency holdings to meet debt obligations.

A cryptocurrency hedge fund manager stated, "If you're using debt to pay off existing debt, this structure is very unhealthy and makes me very uneasy." He added, "You could face systemic risk because there are too many of these fragile structures that need to be unwound completely or partially, which will put pressure on the market."

He also stated, "I hope regulators will oversee this instead of everyone assuming the market will keep going up forever and building treasuries."

Investors say they are aware of the risks but are eager to make money during prosperous times. Evans from UTXO Management, who serves on the boards of several cryptocurrency treasury companies, said he is pushing CEOs to "have a way to generate cash through operating businesses during market downturns and find other ways to benefit from Bitcoin besides just raising capital."

However, even industry stakeholders are becoming increasingly skeptical. Estes said, "This will end with a bubble bursting. As fast as they rise, they can fall just as quickly."

免责声明：本文章仅代表作者个人观点，不代表本平台的立场和观点。本文章仅供信息分享，不构成对任何人的任何投资建议。用户与作者之间的任何争议，与本平台无关。如网页中刊载的文章或图片涉及侵权，请提供相关的权利证明和身份证明发送邮件到support@aicoin.com，本平台相关工作人员将会进行核查。